Yes, personal loan affects your credit score. Your bank or credit union typically reports your loan application and all your payments, and the loan shows up on your credit report file. If you make your loan payments on time and keep paying down your existing balance, your loan is unlikely to negatively affect your credit score.

You might think it's great you've found a lender who doesn't need to check your credit history before granting a personal loan but actually, you're probably seeing the first sign of a scammer at work. Even worse: a lender who asks you to send money to them, saying it's needed to secure your loan. No. It's not. Only apply with a known and reputable bank or credit union only.

Most personal loans are unsecured. This means you qualify based on your credit history, and you don't need to put up any collateral. If you can't qualify for an unsecured loan, your lender may be willing to give you a secured loan. In this case, your loan is linked to your savings account or some other form of financial collateral. If you don't make your payments, the lender can claim the collateral as their own.

An interest rate of five percent? Sounds great. How about 36 percent? Both are possible in the world of personal loans, where interest rates vary wildly. Typically, the better your credit score is, the lower interest rate you can access. But pay attention as well to the term of the loan, since longer loans result in more interest payments.

Maybe you took out a personal loan to deal with an emergency, and now the emergency is over and you're ready to pay the loan back. Watch out. You may be charged an extra fee if you pay off the loan before it's due. That's because the lender was counting on all that interest that they won't receive if you prepay.

If you're seeking a personal loan from a bank or a credit union you already have a relationship with, chances are very good that your lending source is legitimate. There are other sources for personal loans, including online and peer-to-peer lenders. To find out if these are legit (especially internet lenders), check with the Better Business Bureau or the Consumer Financial Protection Bureau before you apply.

If you have a good credit score, don't assume a personal loan is your only option for some quick, urgently needed cash. If you own your home, a home equity line of credit may offer interest rates significantly lower than those for personal loans. A home equity line of credit is also likely to offer you a greater amount of money if you need it. Alternatively, a new credit card that lets you transfer balances with a zero percent introductory interest rate is a good deal if you're taking out a loan to pay off debt. Make sure to pay the balance before that introductory rate goes up, though.

Some lenders charge origination fees that can range from one to six percent of the loan amount. These fees are designed to cover the lender's processing costs, including pulling your credit history. If you're shopping around for a personal loan, make sure to ask about these fees so you can compare your options accurately.

Lenders may be willing to offer personal loans for anywhere from $1,000 to $50,000. Ask your bank what cap they want to put on your borrowing ability. They'll base their decision on your credit history (including any other debt you're currently carrying) and your income.

Some personal loans may have a term of one year for repayment, while others might stretch as long as 60 months or five years. You'll pay less per month with a longer loan term, which may look appealing. However, you're likely to pay far more in interest with that longer term, and that open loan might make it difficult to be approved for other credit.